Wall Street Journal misses boat again with anti-Amazon hit piece

The Wall Street Journal has posted another scathing anti-Amazon editorial. It might be paywalled; if so you can bypass it by googling the headline. But I’m willing to bet you can guess pretty much exactly what it says without even reading it.

Let’s review: the Wall Street Journal is owned by Rupert Murdoch’s News Corp, which also owns Big Five nee Six publisher HarperCollins. HarperCollins was originally going to stay out of the agency pricing cabal until Steve Jobs reached out to Murdoch’s son James only two days before the iPad was going to launch, asking him to pressure HarperCollins to “throw in with Apple and see if we can all make a go of this to create a real mainstream e-book market at $12.99 and $14.99.”

The exchange proved persuasive. On January 26, HarperCollins signed with Apple at the urging of its corporate parent. [HarperCollins CEO Brian] Murray ultimately endorsed signing the deal. If the decision was to be made just for HarperCollins, Murray later explained, he wouldn’t have signed. But in terms of News Corp.’ s overall relationship with Apple, the deal made strategic sense.

The Wall Street Journal is also the only major news source to have made a big deal out of Bromwich allegedly being an “old friend” of Judge Cote, who wrote him a glowing letter of recommendation for an earlier job. (You’d think if there was actually a story there some other major media would have picked up on it, wouldn’t you?) The resulting picture we get is one of a paper that’s just a leeeeetle bit biased.

So here we have an editorial about how the DoJ coming down on the publishers was a big mistake, evil Amazon is going to be evil again, and so on. All pretty run-of-the-mill stuff, the same old same old thing we’ve seen time and again. There’s almost nothing new or special about it. In fact, there are just two sentences I want to quote, because they’re the perfect illustration of how this point of view is fractally wrong—not just wrong overall but also wrong in the details. If you think I’m taking them out of context, feel free to read the original article and check. But I promise I’m not.

But instead of letting the market decide whether the wholesale model or agency model should prevail, Judge Denise Cote dictated the outcome by ruling against Apple.

No. No no no no no. The market can’t decide when five of the six publishers who control the vast majority of it are in cahoots. That is the exact opposite of the “market deciding” anything. That’s why the suit was brought in the first place! Apple and the publishers illegally broke the market.

Given Judge Cote’s shaky antitrust reasoning, there’s a good chance the appeals court will reverse her ruling.

According to Pam Samuelson, the Richard M. Sherman Distinguished Professor of Law and Information at the University of California, Berkeley, Apple’s task on appeal is a daunting one.

“Apple may have a tough time getting this ruling reversed because the judge made findings of fact about the antitrust violation that appellate courts typically defer to,” Samuelson told AllThingsD. “Most reversals happen as to interpretations of the law.”

Samuelson’s point: Apple argued that the facts show no conspiracy in restraint of trade. But Cote found that the company’s actions were a per se violation of antitrust law. In other words, they were inherently illegal, so there was no need to prove that they had any anticompetitive effect on the e-books market. And Cote’s opinion relies so heavily on facts that it leaves very little room for an appellate court reversal.

Furthermore, the appeals court has declined to grant Apple the stays it’s asked for not once but twice, suggesting that it doesn’t believe Apple has a very high likelihood of prevailing on appeal either. And it’s the one who’s going to be ruling on that appeal, so you’d think it would know. (Oh, maybe it’s “biased,” too, just like Judge Cote for daring to offer a pre-trial view, even though that’s a pretty run-of-the-mill practice in lawsuits.)

No, Chris, they didn’t miss the boat.I’m sure they said exactly what they said and no more and I would bet that nowhere did they state that they were owned by the same person who owned HarperCollins. Amazon can use pricing and slow stock turnaround in negotiations while the publishers are using the media and biased reporting as their tactics.

Ah, all this would be so touching if it weren’t so frustrating. The Wall Street Journal, with somewhat remote corporate ties to a Big Bad Publisher, isn’t to be trusted, we are told, but another giant corporation, Amazon, is to be trusted despite the fact that what’s been squabbled over is its own corporate profits. That makes no sense at all.

Keep in mind that the WSJ’s success doesn’t hinge on any conspiracy theory about the sales of HarperCollins’s books, much less those of Hachette. One would even suspect that if HC were lurking in the shadows, shaping news stories, Hachette would be portrayed as the bad guy here. Besides anyone who understand news reporting knows that the success of the WSJ hinges on presenting business news accurately. Get that wrong, and it is in trouble with its core audience which isn’t, I might add, the executive board of Hachette.

it helps to keep in mind what this squabble is about. Ebooks offer an enormous improvement in the efficiency of book production and distribution. No printing costs, no inventory costs, no significant shipping costs, and no returns.

Large publishers see ebooks as a one-to-one replacement for their print versions especially the hardback versions that bestsellers often first appear as. They’ve been fighting to keep the dollar profit made from the each ebook sale equal that that for hardbacks. That has meant that they’ve labored to keep ebook prices high and limit author royalties. At the moment, they’re being successful, apparently posting record profits. That illustrates from yet another angle that the DOJ lawsuit didn’t achieve what it claimed.

But these major publishers face two threats.

* One threat are authors, who are beginning to ask why they get only perhaps 25% to 35% royalty on an ebook sale when they could post that same ebook on the iBookstore and earn 70%. Being an author myself, I’m rooting for them.

* The other threat is Amazon. It knows about those record profits because it has been sending large checks to those publishers. The battle with Hachette is Amazon’s attempt to grab more of those ebook profits for itself. It’d like the royalties that it pays to publisher to be a lot closer to 35% than the sub-70%. it pays now.

What authors who’re Amazon fan-boys fail to realize is that Amazon’s success will come almost exclusively at the expense of authors. With the current ebook royalty scheme, Hachette ought to be paying its authors more. If Amazon wins, publishers will have to best of all reasons to deny higher royalties to authors. “Hey, Amazon is only giving us 35% of retail. We can’t afford to give you any more than 25%.” That means that the author gets 25% for writing a book. Amazon gets 65% for processing a credit card transaction and a file download.

And we can rest assured if Amazon wins and grabs the lion’s share of ebook profits away from these giant publishers. it will do precisely the same to independent authors. Amazon already pays only 35% royalties for ebooks outside the $2.99-9.99 price range. That 35% will become the norm at all price levels. For the typical author, that means his Amazon bank transfer will be cut almost in half.

If you want to see your Amazon income slashed in half, go ahead and champion Amazon. But remember that you’ve not right to complain with the cuts come. You are only getting what you deserve as an Amazon fan-boy.

I keep seeing claims that authors are “Amazon fan boys”. This insult really has little meaning since many authors are on multiple platforms and don’t hesitate to jump to another one when it represents the potential to make money. It’s just that right now the other platforms just aren’t as good. Some have the potential to be better and I plan to keep my eye on them for the next several years, but until then, I don’t see a reason to criticize Amazon for what it does well. It’s not a perfect company and it does some things that annoy people, but it gets a lot of fleck mostly from jealous people or people who are perpetually bitter from what I can see. These people keep making predictions as to what Amazon will do while the rest of us are looking at our options and not at useless and mostly emotion-driven predictions. We are diversifying and trying different things to build an audience that can sustain our careers with or without Amazon or any of the other platforms if that day comes. I guess that’s hard to see though when your main aim is to criticize Amazon…

David Rothman { Yes, Anne, proprietary DRM frustrates me too. But at least with the standard ePub format, we're a good part of the way there. As for... } – Aug 02, 3:23 PM

Anne { @David- I think freedictionary.com needs to add something along the lines of "as long as the specs don't allow for the addition of a variety... } – Aug 02, 1:56 PM

David Rothman { I'll go with this definition of "standard" from thefreedictionary.com: "A set of specifications that are adopted within an industry to allow compatibility between products." Thanks,... } – Aug 01, 11:25 PM